Foreign Exchange - Australia Weekly Update - Monday, July 27, 2009 5:46 - 0 Comments

World First NZD/AUD Weekly Update – 27th July 2009

NZD
New Zealand authorities are concerned about the strength of the New Zealand dollar against the U.S. currency, but won’t intervene as they couldn’t have much impact in the massive global foreign-exchange market, Trade Minister Tim Groser said last Tuesday.

The Kiwi’s strength is “a point of concern,” Groser told CNBC in an interview. But he said that while most attention focuses on the Kiwi/U.S. dollar rate, the New Zealand currency remains “pretty stable” against that of neighboring Australia, where it has been trading around 80 Australian cents.
In the week ahead in New Zealand, the Reserve Bank is expected to leave official interest rates unchanged at 2.5 percent given an improving global outlook and an expected recovery in New Zealand.  Most economists expect official interest rates to stay low till late next year.

AUD
In Australia last week the index of final Australian producer prices fell 0.8 percent in the second quarter of 2009 from the first quarter and rose 2.1 percent from a year earlier. The fall in the index in the second quarter was due to decreases in industrial machinery and equipment manufacturing prices, which fell 5.6 percent, while building construction prices fell 0.5 percent, and electronic equipment manufacturing prices fell 10.5 percent.

New car sales in Australia jumped again in June, up 5.7 percent mth/mth, taking them to a 10 month high. The overall increase has been driven by the government’s extension of the small business tax break that raised the tax deduction on cars.

The index of job vacancies for skilled workers in Australia fell by 1.7 percent in July from June, and was 60 percent lower than the same period a year ago.  The index currently stands at 35.5.  In July, decreases were recorded in 14 of the 18 occupational groups measured by the skilled vacancy index, with the strongest falls in the areas of organisation and information professionals, down by 13.3 percent on month; and building and engineering professionals, down by 11.1 percent.

The week ahead:
NZD
Tuesday 28th – Trade Balance (June)
Wednesday 29th – Building Permits (MoM – June), National Bank Business Confidence (MoM – July)
Thursday 30th – RBNZ OCR Decision

AUD
Tuesday 28th – National Australia Bank’s Business Confidence (QoQ – 2Q), RBA Governor Glenn Stevens Speech
Thursday 30th – Building Permits (MoM and YoY), HIA New Home Sales (MoM – Jun)
Friday 31st – TD Securities Inflation (MoM – July), Private Sector Credit (June)

GBPNZD
Sterling continues to struggle against the NZD and last week saw the pair remain at the bottom levels that it has traded at for the past few years.  At the start of last week the rate hovered a couple of cent above the 2.5 mark but by midweek had descended to the low of the week at 2.49 before making a small recovery by Friday to see it back in the low 2.5’s.   Unless the RBNZ cut interest rates this week (which is very unlikely) we expect this pair to continue trading in the low 2.5 levels. 

The week ahead in the UK:
Monday 27th – Nationwide Housing Prices (YoY)
Tuesday 28th –  CBI Distributive Trades Survey (MoM – YoY)
Wednesday 29th – Mortgage Approvals, Money Supply, Consumer Credit
Friday 31st  – Consumer Confidence

GBPAUD
Last week the pound continued to trade in the low 2.0’s against the Aussie Dollar.  The start of the week was the highest the rate traded (2.0335) and thereafter it dipped to lower levels, finishing the week at 2.0113.

A weaker pound is suiting the recovery of the UK economy in the Bank of England’s eyes therefore there are unlikely to be any surprises with this pairing in the short term.  We expect a continuation over the coming week of trading in the low 2.0’s with risks to the downside as ‘high risk’ investment appetite increases for buying commodity currencies.

For data out in the UK please refer to GBPNZD above.

EURNZD
The outset of last week saw the EURNZD trade at the peak for the week (2.187) and thereafter the pair lost a small amount of ground as it continued its move down.  The general downward trend that has been in evidence since the beginning of 2009 has slowed and there seems a reasonable amount of resistance at EURNZD 2.0 that should see the rate hold in the short term above this level, however if the NZD is boosted by a ‘non cut’ to the OCR this week the 2.0 level could be tested. 

The week ahead in the Euro zone:
Monday 27th – Import Price Index (Germany YoY and MoM)
Wednesday 29th – Consumer Price Index (Germany YoY and MoM)
Thursday 30th – Retail Sales (Germany YoY and MoM), Unemployment Rate and Change (Germany), Consumer Confidence (July), Industrial Confidence (July)
Friday 31st – CPI Estimate (July), Unemployment Rate (June)

EURAUD
There was little movement for this pair last week with only a small downward move in favour of the Aussie dollar.  Starting the week at 1.7550 the pair finished the week at 1.7393.

For data out in the Euro zone please refer to EURNZD above.

NZDUSD
The NZD continued its run of strength against the USD last week starting at 0.6470 and ending the week at 0.6550 having peaked midweek at 0.66.  With an increase in risk appetite and Bernanke’s lack of desire to withdraw monetary support anytime soon in the US there is increased downside risk against the USD.  This week’s RBNZ meeting and decision on the OCR rate could see the NZD strength underpinned should the RBNZ do as expected and keep the OCR unchanged so we expect the rate to continue trading between 0.64 and 0.66.

The week ahead in the US:

Monday 27th – New Home Sales (MoM), Fed’s Bernanke Speech
Tuesday 28th – S&P/Case-Shiller Home Price Indices (May), Consumer Confidence (July), Manufacturing Index (July)
Wednesday 29th – MBA Mortgage Applications, Durable Goods Orders, Crude Oil Stocks change, Fed’s Beige Book
Thursday 30th – Jobless Claims (July)
Friday 31st – GDP (2Q), Personal Consumption (2Q), GDP Price Index (2Q)

AUDUSD
The AUDUSD pairing moved slowly in AUD’s favour during the course of last week however the gains were minimal, starting last week at AUDUSD 0.8130 and finishing at 0.8182. 

The US has seen quite a bit of positive data recently which has unsurprisingly sparked several economists to suggest they will be one of the first developed countries to pull out of recession.  One would normally expect some USD strength to follow such sentiment however the USD remains on the back foot against a number of its pairings including the AUD.  This is partly due to a worryingly increasing unemployment figure in the US which maybe overshadowing other more positive data, but also growth in the risk investment arena which involves the USD being sold in favour of higher yielding currencies such as the Aussie dollar.  Subsequently we think the AUDUSD rate will continue in its slow rise this week.

For data out in the US please refer to NZDUSD above.

AUDNZD
Last week saw a small amount of movement for this pairing – mainly going the AUD’s way.  At the outset of the week the rate was 1.2444 which dipped to 1.2370 midweek, before recovering to 1.2473 on Friday.  We expect the coming week to see the pair continue to trade between 1.2350 and 1.25.

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Please feel free to contact me (giles.smallwood@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar.
 
If you would like to discuss your foreign exchange requirements then please don’t hesitate to call our Southern Hemisphere Office on our New Zealand Free phone number  0800 666114 , or Australian Free phone number 1800 701540.
 
Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice.
Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms.